Expectations are rising that South Korean electric mobility companies might counteract the rapid market penetration of cheaper Chinese alternatives by next year. Particularly, South Korean SMEs, medium-sized businesses, and startups are strategizing to differentiate themselves from Chinese products by emphasizing quality, technological prowess, and after-sales service (AS).
According to industry sources on Oct. 10, domestic SMEs are making aggressive investments in the electric bus and electric two-wheeler markets. With significant investment, electric bus company Woojin Industrial System aims to recover a market share of 20%, while electric two-wheeler producer Daedong Mobility is targeting a market share exceeding 10%.
Woojin Industrial System plans to complete its electric bus factory in Gimcheon, North Gyeongsang Province, Korea by the second half of next year, after investing 40 billion won. Leveraging its R&D experience in localizing core electric vehicle components since its establishment in 1974, the company has enhanced its competitiveness by producing key electric bus components in-house. Last November, Daedong Mobility invested a total of 90 billion won to inaugurate a new factory (S-Factory) in Daegu, capable of producing 145,000 mobility units annually. Here, the GS100 electric scooter, boasting a domestication rate of 92%, is manufactured.
Both Woojin Industrial System and Daedong Mobility are differentiating themselves from Chinese products through collaboration with Korean batteries (K-batteries). Primarily, Samsung SDI and LG Energy Solutions batteries are installed in Woojin’s electric buses and Daedong Mobility’s electric two-wheelers, respectively. An industry insider explained, “Chinese electric vehicles had been using cheaper lithium iron phosphate (LFP) batteries, making them more affordable. However, with the increasing emphasis on quality, including batteries and AS, among domestic consumers, Chinese products are becoming less favorable.”
With the establishment of battery production bases, including cathodes, in Korea, securing batteries for mobility companies is anticipated to be smoother. ECOPRO Materials, the largest domestic cathode company, plans to establish four factories in Pohang by the end of this year, following the construction of its 3rd and 4th plants. They aim to increase their cathode production capacity from the current 50,000 tons to 210,000 tons by 2027, a more than four-fold increase. They’ve developed a process to enhance cost competitiveness by adding sulfuric acid to low-purity raw materials to extract high-purity nickel and cobalt. Chemco, a subsidiary of Korea Zinc, is partnering with LG Chemical to start producing 20,000 tons of cathodes from the second quarter of next year, while L&F plans to collaborate with LS Group to expand their cathode production capacity to 120,000 tons by 2029. Chemco and L&F’s factories are set to be located in Ulsan and Saemangeum, respectively.
With a domestic production system for batteries, components, and assembly in place, expectations are growing that the market share of South Korean electric mobility will rebound significantly from next year. The skepticism regional autonomous entities harbor towards after-sales service issues of Chinese products also signals a positive trend. According to data from the Ministry of Land, Infrastructure and Transport and Carisyou Research Institute, the ascent of Chinese products in the domestic electric bus market is gradually slowing. Although the market share rose from 33.2% in 2020 to 37.8% in 2021, an increase of 4.6 percentage points, it only rose by 4.0 percentage points in 2022 and 1.8 percentage points from January to August 2023.
Two-wheelers and small electric vehicles are accelerating their overseas expansion, building on proprietary technology and the K-battery value chain. Notably, there is a prominent push targeting the rapidly growing electric motorcycle markets in India and Southeast Asia. KR Motors showcased its electric two-wheeler E-LuTion, developed in collaboration with LG Energy Solution and Hyundai KEFICO. MOHENIC MOTORS established a two-wheeler joint venture in India with local company Sundak. Cevo Mobility, the leading domestic mini-electric vehicle company, also plans to establish electric vehicle factories in Indonesia and the United Arab Emirates (UAE). MY VELO produces electric bicycles based on its motor production technology and exports 90% of its products to Europe.
According to market research agency Fortune Business Insight, the global electric mobility market is projected to grow at an average annual rate of 27.2%, from US$279.5 billion in 2021 to US$1.5072 trillion by 2028. Furthermore, external conditions are favorable. The government is strengthening economic cooperation with emerging markets, including Southeast Asia, to reduce economic dependence on China. As of Oct. 7, South Korea and the Philippines have formally signed a Free Trade Agreement (FTA), after which 5% tariffs on South Korean cars will be abolished.
According to a report published last year by the Korea Automotive Research Institute, only 17.7% of domestic automotive component companies produced parts for future vehicles, and a staggering 72.6% had not established plans to adapt to the transition to future vehicles.